The art of buying and holding real estate is a strategy that investors have taken advantage of over the years. The fact that after buying the property, you can rent it out before selling it has made it a very common type of investment. This is because it enables the owners to get short-term cash and the benefit of long-term profit.
Even if you got the property via mortgage, the income generated from the rent can help you offset the loan. If you want to learn real estate investing, learning how to buy and hold real estate is an art you must master. Therefore, to ensure you gain true mastery, this article will guide you on how to buy and hold real estate in easy-to-follow steps. Let’s jump right into it…
Identify the Perfect Property
The first step in the journey is to identify the perfect property. This is regardless of the purpose behind your purchase of the property. Folks who purchase for rehab emphasize offers that enable them to get maximum returns for the bottom line.
In the case of buying and holding, your purpose is to rent the property. Therefore, you must consider how much your monthly return will be to determine the worth of the purchase. Even if you are looking for a rental asset, your negotiation must be as if you are purchasing for rehab.
Getting just any property for a particular price you have in mind is not all there is to. You must ensure that the building you purchase can be used for rent. This will ensure that you get tenants to rent the place.
Therefore, you need to pay attention to popular residential areas. These are areas where individuals are willing to pay good money to live in. Purchasing properties in such areas might be more expensive, but the return is usually worth it. Always examine a property from the perspective of likely tenants.
Before making your offer, it’s advisable to do proper research on the properties in that location. Find out what properties cost in the location. You can visit https://resources.pollfish.com/ to learn how to conduct real estate market research. The research requires patience; therefore, do not be in a hurry to make payment.
When it comes to holding and selling real estate, it’s advisable to purchase a family-friendly, traditional home. A property with three to four bedrooms is usually preferred by most tenants. With such a building, you can rest assured that you’ll have renters for the period until you’re ready to sell, let’s say in about 20 years.
Secure Funding for the Property
Contrary to popular belief, you can utilize private or hard money to pay for the real estate you want to buy and hold. This kind of real estate investment allows you to use a wide range of financing methods to secure the property. The only difference is that the structure is somewhat different some months later.
You can use any of these options to buy and hold property:
- Private money
- Hard money
- Partners
- Seller financing
- FHA purchase loans
- Traditional lender financing
Upgrade Your Property
At this point, you now own the property. While you can immediately put it up for rent, it’s advisable to upgrade it a bit. Some experts suggest you purchase turnkey rental buildings. The rationale behind this is that it saves you the cost of doing a lot of renovation. However, bear in mind that such buildings might be sold at almost the full asking cost.
When we talk about enhancing the building, we’re not saying you do a total face-lift. Instead, you just have to make it more comfortable for tenants to reside in. You can click here to discover quick tips to upgrade your property. Areas to focus on during the upgrade include painting the walls, upgrading the flooring, and then enhancing the bathrooms and kitchens.
Manage Your Property
Some tenants are not the easiest people to manage and this is why some investors are not so upbeat about buying and holding real estate. However, this shouldn’t stop you from making this investment. To avoid some of the horrible tenant stories you might have heard from being your reality, it’s advisable to hire a property manager. These professionals are usually more experienced and equipped to deal with a wide number of challenges.
If you choose to manage it yourself, then you must have formulated a management system before you purchase the building. Running a rental building requires patience, effort, and time. Therefore, you need to prepare yourself for this process by being dedicated and upgrading your management skills to ensure you enjoy the rewards of renting out your assets.
Prepare for Unexpected Events
Part of managing your assets is being prepared for unexpected events. Issues such as a rent default, plumbing issues, etc. can occur randomly. Some months might be hassle-free, and then you find yourself dealing with several issues all at once. If you encounter this, you shouldn’t feel it’s something strange.
To enable you to confront these unexpected events, it’s recommended you have a savings fund for such events. If you don’t have such reserved funds, you’ll find it difficult to fix the issues. It could cause you to incur debt you didn’t plan for or use up money you kept for other purposes/projects.
Furthermore, it could affect your management style of the asset in your bid to get funds to fix the issue. You could end up losing good tenants because you’re either demanding more money for rent or not being patient with defaulters. Such actions can negatively impact returns in the future.
Conclusion
Buying and holding real estate is a great investment for anyone seeking to get both short-term and long-term profits on their asset. While this type of investment is great and all, caution is required to ensure one gets all the benefits attached to it. The article above provides a quick guide on how to buy and hold real estate for anyone new to this type of investment.
